Four bonds are trading in the market. Bonds make semiannual coupon payments. For zero coupon bonds (for
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Four bonds are trading in the market. Bonds make semiannual coupon payments. For zero coupon bonds (for this question) use semiannual discounting.
Maturity Coupon rate
A 8 3%
B 4 3%
C 8 0
D 4 0
a. What are the bond prices if yields to maturity for all maturities are 3%?
b. What are the bond prices if yields to maturity for all maturities are 4%?
c. What are the percent changes in the bond prices?
d. Briefly discuss.
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